The two most common forms of bankruptcy are Chapter 7 and Chapter 13. Chapter 7, known as "straight bankruptcy," arranges for complete liquidation of debt. In return the creditor has to surrender all his non-exempt assets via liquidation and ensuing distribution to the creditors. Chapter 13 bankruptcy also known as "reorganization," allows the debtor to reorganize his debt structure over 3-5 years. To be eligible for Chapter 13, the creditor must prove to the court that he has sufficient income to repay his debts. If approved he must submit a detailed payment plan.
Chapter 7 bankruptcy is most often appropriate for debtors who have little property, other than their household furniture and house necessities, and who have little money left over at the end of the month, or perhaps have trouble meeting basic expenses.
The advantages of Chapter 7 bankruptcy are that it provides for total discharge of debts and the process moves rapidly. Once the debtor has filed bankruptcy, his creditors cannot collect the debt from him directly.
To qualify to file Chapter 7, a debtor must pass the means test, which determines is his total income is below a certain specified amount
Chapter 13 bankruptcy is appropriate for clients who will work out a 3-5 year repayment plan (longer in the future) and will cooperate with a credit counselor to pay their debts. Monthly payments are made through the "debt trustee," who apportions the money to creditors according to a pre-arranged dispersal plan. Payments in this form of bankruptcy are made from disposable income that is left over after basic expenses are met, food clothing, shelter, etc. To be eligible for Chapter 13 bankruptcy, a debtor must have unsecured debts below $360,475 and secured debts are less than $1,081,400.
In both Chapter 7 and Chapter 13, the debtor must obtain mandatory credit counseling within 180 prior to filing bankruptcy with the courts. The counseling is designed to give debtors a chance to solve their financial problems themselves and with the help of the course counselors, without the need to go to court. In addition, this course, as well as additional courses that people in bankruptcy must take, aim to teach people in debt how to manage their finances so they won't go into debt again after they come out of bankruptcy.
Chapter 7 bankruptcy is most often appropriate for debtors who have little property, other than their household furniture and house necessities, and who have little money left over at the end of the month, or perhaps have trouble meeting basic expenses.
The advantages of Chapter 7 bankruptcy are that it provides for total discharge of debts and the process moves rapidly. Once the debtor has filed bankruptcy, his creditors cannot collect the debt from him directly.
To qualify to file Chapter 7, a debtor must pass the means test, which determines is his total income is below a certain specified amount
Chapter 13 bankruptcy is appropriate for clients who will work out a 3-5 year repayment plan (longer in the future) and will cooperate with a credit counselor to pay their debts. Monthly payments are made through the "debt trustee," who apportions the money to creditors according to a pre-arranged dispersal plan. Payments in this form of bankruptcy are made from disposable income that is left over after basic expenses are met, food clothing, shelter, etc. To be eligible for Chapter 13 bankruptcy, a debtor must have unsecured debts below $360,475 and secured debts are less than $1,081,400.
In both Chapter 7 and Chapter 13, the debtor must obtain mandatory credit counseling within 180 prior to filing bankruptcy with the courts. The counseling is designed to give debtors a chance to solve their financial problems themselves and with the help of the course counselors, without the need to go to court. In addition, this course, as well as additional courses that people in bankruptcy must take, aim to teach people in debt how to manage their finances so they won't go into debt again after they come out of bankruptcy.
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